The tenants paying the price so landlords don’t have to

Holding fees, deposits, tenancy agreement fees, payment for reference checks, inventory charges, check-out costs. It’s an expensive time to rent a home in the UK, even before you consider figures from referencing firm HomeLet that show rents rose by more than 5 per cent in the 12 months to April.

This week a major charity added its voice to growing demands that letting agents be banned from charging fees to tenants. Citizens Advice has warned that letting agent fees have risen 60 per cent in the last 5 years alone and that tenants are suffering as a direct result

It has argued that all UK letting agency fees should be paid by landlords as they can shop around, whereas renters have to deal with whichever agency is marketing the home they want. Not only are tenants paying higher bills but there’s also concern that high letting agent fees discourages tenants from moving out of unsuitable homes, because the cost of fees and deposits can be so significant.

Last year it became a statutory duty for letting agents to fully publicise fees in advance, but the Letting Fees campaign organised by Generation Rent has found that 14 per cent of agents still do not list their fees publicly.

But even with greater transparency, the issue of fees is a pressing one for the UK’s 11 million private renters that in spring this year there was a Commons debate on the subject.

Conservative MP Maria Caulfield said then that increased competition for properties has led to rocketing agent fees. In her constituency of Lewes alone the local Citizens Advice charity has found fees ranging from £175 to £922. She told the House: “Not only has the amount charged by letting agents increased, but there has been an increase in the types of fees charged.”

However, the Government does not agree that an outright ban on fees for tenants is necessarily the answer. Such a ban already exists in Scotland and Marcus Jones, under-secretary of state in the Department for Communities and Local Government, says the evidence strongly suggests a connection between banning fees and higher rents for tenants.

Despite that, campaigners say it is the only solution. A spokesperson for the Letting Fees campaign argued: “A landlord is more able to ‘shop around’ than a tenant and so has a more powerful position to avoid and force down uncompetitive charges. Even if the costs are returned to the tenant through higher rent the total amount paid would be reduced – and importantly spread over the length of the tenancy, which reduces the financial shocks of renting.”

An outrageous example

The Citizens Advice research will come as no surprise to tenants, who have been paying these rising fees for years. Just last week one Twitter user, Magnus Jamieson, posted an example of the various fees chargeable through one agency, opining that “letting in London “is ****ing bananas”.

His succinct outrage was easily explained by the fees listed by the agent. There would be a non-refundable holding fee of £500 to secure the property (although this would be deducted from the first month’s rent). Referencing fees of £60 per tenant plus £60 each for any guarantors, there was also a tenancy agreement fee of £250. To renew their tenancy the household would pay £120, and when the tenants came to leave there would be check-out fees of up to £175.

With fees that high, a couple with two guarantors who remained in a two-bedroom property for two years would pay almost £800 in fees alone. That’s a substantial amount for tenants who face paying high fees when they move again, potential before any remaining deposit has been released. What’s more, it’s on top of what the agent charges the landlord.

That is not even a particularly extreme example. We found agents charging tenants all that and more, including £30 and more for a right-to-rent check and check-out fees exceeding £250.

Paying but not the customer

Tenants are also in a peculiar position as they are paying for a service when the landlord is the customer. The landlord is also able to shop around for an agent, while tenants are forced to use whatever letting agent is advertising the property that best suits their needs.

Gillian Guy, chief executive of Citizens Advice, says: “Letting agents are hiking up their fees for a service that’s often not up to scratch.

“With fees rising year on year for letting agents, many tenants will rightly be wondering why they are paying hundreds of pounds for a simple contract renewal or for management services that leave them waiting months for essential repairs…

“Private renters shop around for properties, not for letting agents. Landlords are better able to choose agencies based on performance and cost and it should therefore be landlords paying letting agent fees, not tenants picking up these rising costs.”

How much? Tenants rights group The Tenants’ Voice suggests tenants should not pay more than £50-100 for an inventory fee in a furnished tenancy, £50-100 for a tenancy reference, and £100 for an administration fee. Unreasonable charges might include: a penalty payment if you don’t pay the rent by standing order, a reservation fee to hold a property while you get a reference or deposit, and both moving in and moving out charges.